Acquisition of ESG Accelerating HENSOLDT's integrated sensor solutions strategy December 2023

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Acquisition of ESG Elektroniksystem- und Logistik-GmbH ("ESG"), a leading German defence systems integrator

Transaction terms	100% of ESG for an enterprise value ("EV") of €675m(1) plus an earn-out of up to €55m(2) − − Implied EV(3)/EBITDA 2024E of ~10x post run-rate cost synergies (~14x pre-synergies) − The transaction has full support of HENSOLDTs two key shareholders, the Federal Republic of Germany and Leonardo S.p.A. − Expected to be completed by H1 2024, subject to certain conditions, including obtaining necessary regulatory approvals
Compelling strategic rationale	− High growth company – low double-digit annual revenue growth − Acceleration of sensor solutions strategy by acquiring leading innovation, software engineering and systems integration expertise − Combination creates advanced capability in integrated sensor solutions for multi-domain operations and battlefield digitalisation
Attractive value creation(5)	− Accretive to revenue growth and FCF(4) generation with significant cost (~€19m annual run-rate EBITDA impact) and revenue synergies − EPS accretive by year 2 including cost synergies only and double-digit accretive by year 4 including cost and revenue synergies − ROIC(6) above WACC by year 4 including cost synergies only and by year 3 including cost and revenue synergies
Prudent financing	− Planned capital increase from authorized capital of up to 10% of the current share capital with remainder financed by new debt The Federal Republic of Germany(7) intends to participate in the potential capital increase(8) − 2024 pro forma net leverage expected to be ~2x(9) −

(1) Including net cash of ~€85m, pensions of ~€80m and IFRS 16 leases of ~€85m

(2) Earn-out based on specific performance targets to 31 December 2024

(3) Including earn-out of €55m

(4) Adjusted pre-tax unlevered FCF (FCF excluding non-recurring effects, interests and taxes)

(5) Financial impact based on EV including earn-out of €55m; Year 'n' means nth full year after expected closing [ie Year 1 is 2025]

(6) ROIC = Taxed EBIT divided by EV

(7) Indirectly acting through Kreditanstalt für Wiederaufbau (KfW) (8) Pro rata to their shareholding quota

(9) Net leverage including earn-out of €55m and lease liabilities. Excludes pensions

ESG snapshot

Key highlights

Founded in 1967 and headquartered near Munich, Germany
~1,380 highly skilled FTEs including ~800 engineers
16 locations in Germany, Netherlands and USA (17% of revenue outside Germany)(1)

A leading German platform-independent systems integrator for defence and security

Trusted partner to the German Armed Forces and international allies
Innovation focus on battlefield digitalisation (eg MDO, CESMO, GMN, DaCAS, ADLER)

Note: MDO (Multi-Domain Operations), CESMO (Cooperative Electronic Support Measure Operations), GMN (German Mission Network), DaCAS (Digitally-aided Close Air Support) (1) 2022A revenue based on HGB accounting standards

ESG snapshot (continued)

Strong growth and cash flow profile (IFRS, €m 2023E)			Trusted partner
			Selected customers	Selected industrial partners

Pipeline	~€5bn(1)	Significant growth opportunity
Revenue	~€330m	Low double-digit annual growth
EBITDA	~14% margin	<1.5% maintenance capex(2)	NATO
			Swiss Army EU

(1) Unweighted pipeline for 2024-28E (2) % of revenue

ESG is critical to major platforms and adds to our portfolio

Selected platforms

% of Revenue 2022A(1)

Note: Selected platforms: NEOS (Network Enabled Operations Support), FCAS (Future Combat Air System), MAWS (Maritime Airborne Warfare System), STH (Schwerer Transporthubschrauber), SuZ (Systemunterstützungszentrum), IAD (Integrated Air Defence) UAS (Unmanned Air Systems), CESMO (Cooperative Electronic Support Measure Operations)

ESG provides complete solutions and deepens our lifecycle services offering

Selected platforms

	Fixed Wing Aircraft			Aviation Systems		Helicopter		Land		Sea	Cyber

Main ESG offering	F-35 Lightning II	P-8 Poseidon	NEOS – Multi Domain	FCAS Sensor Pillar	MAWS	STH Chinook	SuZ Helicopters	IAD / Arrow 3	Counter-UAS	F123	CESMO
Concept development/ R&D
Software engineering/ System integration
Training/ Logistics/ Maintenance

Note: Selected platforms: NEOS (Network Enabled Operations Support), FCAS (Future Combat Air System), MAWS (Maritime Airborne Warfare System), STH (Schwerer Transporthubschrauber), SuZ (Systemunterstützungszentrum), IAD (Integrated Air Defence), UAS (Unmanned Air Systems), CESMO (Cooperative Electronic Support Measure Operations)

ESG transforms our sensor capabilities into integrated solutions for Multi-Domain Operations and battlefield digitalisation

Note: NEOS (Network Enabled Operations Support), GMN (German Mission Network), AESA (Active Electronically Scanned Array)

ESG accelerates our stated growth strategy

Strong fit with M&A criteria

	ESG
Access to disruptive technologies
Strengthen key regions and enter new markets
Expanding product portfolio
Creating value / scale from consolidation

Compelling strategic rationale for combination

		…Even stronger together

State-of-the-art innovation, software engineering and system integration capabilities	•	Highly complementary expansion of integrated sensor solutions offering
Trusted partner to the German Armed Forces and international allies	•	Transformed innovation capacity for battlefield digitalisation and MDO(1)
MDO(1) enabler with cross-domain and cross-divisional capabilities	•	Attractive combined positioning for future defence programmes
Proven management leading large, highly skilled engineering workforce	•	Significant cost and revenue synergies
High growth with strong outlook from order backlog and large pipeline	•	Great cultural fit with shared vision for accelerated profitable growth